[MARKET ANALYSIS] USD firms despite a dip in yields; AUD lags following dovish RBA presser

DXY is firmer after strengthening on Monday alongside higher US yields, with the Buck supported by elevated energy prices and continued Fed tightening expectations. DXY briefly rose from around 101.30 to above 101.38 in recent trade before paring slightly despite a dip in yields at the time, with the index currently towards session highs in a 101.17-101.39 range, close to the 101.40 Thursday high, and with resistance at 101.50 (from 29th July) in view. EUR/USD is softer as the Dollar strengthens, with the pair extending below 1.1350 and trading towards the bottom of a 1.1343-1.1374 range. Spanish CPI printed hotter than expected at 4.9% Y/Y (exp. 4.7%, prev. 4.3%), with Core CPI also rising to 3.1% from 2.9%, although the data provided little support to the Single Currency. GBP is softer against the Dollar and trades towards the lower end of a 1.3227-1.3258 range. Sterling-specific newsflow centres on PM Burnham’s Labour conference speech later, where reports suggest he will edge the party closer towards rejoining the EU and signal an end to the pensions triple lock, although price action thus far remains largely driven by the firmer Dollar. JPY is broadly flat against the Dollar but outperforming most G10 peers, with USD/JPY trading around the middle of a 157.20-157.59 range. Japanese Finance Minister Katayama reiterated that the undervalued Yen is problematic and said Japan and the US agreed to bolster cooperation on FX after discussions with Treasury Secretary Bessent. Antipodeans underperform, led by AUD following the RBA. The Bank unanimously hiked rates by 25bps to 4.60% and retained the option of further tightening, but Governor Bullock subsequently struck a more dovish-than-usual tone, saying she hopes the four hikes delivered this year will be restrictive enough to slow inflation and that further hikes may not be needed if inflation comes down. AUD/USD fell from 0.7021 during the press conference to a 0.6973 low and remains close to session lows. NZD is also softer against the Dollar.